Barclays suffered a setback on Tuesday after losing its challenge to a pivotal ruling on motor finance commission, a decision that could pave the way for a multibillion-pound consumer redress
scheme under consideration by Britain’s Financial Conduct Authority (FCA).
The case follows growing scrutiny of motor finance practices after the Court of Appeal determined it was unlawful for car dealers to receive commission from lenders without first securing the customer’s informed consent. The FCA is now evaluating a potential compensation scheme for affected consumers.
Barclays Partner Finance had contested a ruling by the Financial Ombudsman Service, which found that a customer was unfairly charged more than £1,300 in commission on a 2018 loan. The court’s decision against Barclays underscores the broader implications for the motor finance sector, a point acknowledged by lawyers for both Barclays and the FCA during hearings in October.
The October hearing took place shortly before the Court of Appeal’s landmark judgment in three related cases involving Close Brothers and South African lender FirstRand. That ruling sent shockwaves through the motor finance industry and heightened concerns for lenders about potential compensation claims.
While Barclays lost its appeal, a glimmer of hope remains for lenders after the UK Supreme Court granted permission last week for the decision to be reviewed. The Supreme Court appeal is scheduled for early 2025.
Major British lenders have already started to brace for financial fallout. Lloyds has set aside £450 million, while the UK division of Spain’s Banco Santander has allocated £295 million to address potential costs stemming from motor finance commission claims. Photo by GroupEditor, Wikimedia commons.
